Condor Petroleum Inc. (“Condor” or the “Company”) (TSX: CPI), a
Canadian based oil and gas company focused on exploration and
production activities in Turkey and Kazakhstan, is pleased to
announce the release of its Consolidated Financial Statements for
the year ended December 31, 2021, together with the related
Management’s Discussion and Analysis. These documents will be made
available under Condor’s profile on SEDAR at www.sedar.com and on
the Condor website at www.condorpetroleum.com. Readers are invited
to review the latest corporate presentation available on the Condor
website. All financial amounts in this news release are presented
in Canadian dollars, unless otherwise stated.
Highlights
- The Company signed three Memorandum
of Understandings (“MoUs”) with various Kazakhstan government
agencies to construct and operate Kazakhstan’s first modular
Liquified Natural Gas (“LNG”) facility.
- Condor
continues to actively pursue an agreement to operate multiple
producing gas fields in Uzbekistan and held numerous meetings with
government ministries to discuss its proposal during the first
quarter of 2022.
- In Q2
2021, the Yakamoz 1 sidetrack well (“Yak 1-ST”) was drilled to a
total depth of 2430 meters and encountered numerous strong gas
shows in three of the four expected gas target intervals. Log data
collected while drilling indicates reservoir-quality formations in
the intervals where the strong gas shows were observed. The well is
currently suspended and awaiting completion.
- In
October 2021, the Akshoky North post-salt exploration well
(“Aks-1”) was drilled to a total depth of 1015 meters. Oil was
encountered within a 30-meter interval but was bio-degraded and
therefore not commercial.
LNG Initiatives
The Company continues to mature opportunities to
implement proven North American modular LNG technologies and
processes in Central Asia to displace diesel fuel usage in the
industrial, transportation and power generation sectors. The
advantages of implementing modular LNG facilities compared to
conventional LNG facilities include the significantly reduced
upfront capital costs and construction time, which are especially
impactful during periods of increasing diesel prices. The modular
LNG plant output can be scaled up to meet continued growth demands.
This initiative also serves to reduce Greenhouse Gas (“GHG”)
emissions as LNG GHGs are significantly lower when compared to
diesel fuel.
The Company has signed three MoUs with various
Kazakhstan government agencies to construct and operate
Kazakhstan’s first LNG facility. The MoUs officially confirm and
underline the Government’s support of the Company’s LNG initiative,
while serving as the basis to formalize the specific terms and
conditions for this investment. Discussions are continuing to reach
agreement on feed-gas and LNG end-user volumes, plant locations and
fiscal terms. Front-end engineering and design are also underway
and expected to be completed in the first quarter of 2022.
Uzbekistan Production
Contract
The Company continues to actively pursue an
agreement to operate multiple producing gas fields in Uzbekistan
and held numerous meetings with government ministries to discuss
its proposal during the first quarter of 2022. If executed, the
production contract could include producing gas fields, associated
gathering pipelines and gas treatment infrastructure. The fiscal
and operating terms would be defined in the definitive contract and
include royalty rates, cost deductibility, gas marketing and
pricing, government participation, governance and steering
committee structures, baseline production levels and reimbursement
methodology.
Turkey Operations
In Q2 2021, the Yak 1-ST exploration well on the
Yakamoz prospect in Turkey was drilled to a total depth of 2430
meters and encountered numerous strong gas shows in three of the
four expected gas target intervals. Log data collected during
drilling operations indicates reservoir-quality formations in the
intervals where the strong gas shows were observed. A combination
of drilling rig mechanical issues and wellbore instability
prevented production casing from being set across the target
intervals. Casing was cemented to 1380 meters, which is 750 meters
above the highest target interval and the well has been suspended
temporarily until the required equipment can be procured and the
Company is seeking a partner to fund the completion activities
including re-entering, casing, and fully evaluating the Yak 1-ST
well. If commercial gas flowrates are confirmed, Yak 1-ST gas would
be initially trucked to the Company’s neighbouring Poyraz Ridge Gas
Facility while pipeline tie-in activities are completed.
The Company is encouraged by the initial Yak
1-ST results as it confirmed the presence of both clastic and
carbonate reservoirs, an active hydrocarbon system, and gas shows
in the deepest Eocene formation, which had not previously been
discovered on the Company’s licenses. Based on the current data,
Yak 1-ST appears to be analogous to the Poyraz West 1-ST well,
which has been the most prolific producer in the Poyraz Ridge
field.
Natural gas and associated condensate production
in Turkey for the year ended December 31, 2021 decreased 65% to
22,095 boe or an average of 61 boepd from 62,688 boe or an average
of 171 boepd in 2020 and production for the fourth quarter of 2021
decreased 68% to 4,141 boe or an average of 45 boepd from 12,902
boe or an average of 140 boepd in the fourth quarter of 2020 due
mainly to natural declines and poor reservoir performance.
Based on the declining production performance at
the Poyraz Ridge and Destan gas fields, cash used in operating
activities, and the Company's prevailing development plans, the
properties were fully written off as impairment expense during Q2
2021 as the recoverable amount was deemed to be negligible. There
are no economic reserves related to the Poyraz Ridge or Destan
properties as of December 31, 2021.
However, during the second half of 2021, Turkish
gas prices (posted in Turkish Lira and converted in CAD at
prevailing exchange rates) increased from $6.12 in June 2021, to
$8.93 in September 2021, to $11.74 in December 2021 and to $17.31
in March 2022. These higher realized gas prices resulted in a small
but positive operating netback1 in Q4 2021. The Company also
believes it is beneficial to maintain active production operations
while efforts continue to complete the Yak 1-ST well.
Operating Netbacks |
2021Q4 |
2021Year |
2020Q4 |
2020Year |
($000’s) |
|
|
|
|
Sales |
251 |
883 |
482 |
2,780 |
Royalties |
(31) |
(115) |
(53) |
(351) |
Production costs |
(142) |
(729) |
(350) |
(1,207) |
Transportation and
selling |
(57) |
(281) |
(99) |
(543) |
Operating netback 1 |
21 |
(242) |
(20) |
679 |
|
|
|
|
|
($/boe) |
|
|
|
|
Sales |
63.21 |
44.81 |
39.70 |
47.25 |
Royalties |
(7.81) |
(5.84) |
(4.37) |
(5.97) |
Production costs |
(35.76) |
(36.99) |
(28.83) |
(20.51) |
Transportation and
selling |
(14.35) |
(14.26) |
(8.15) |
(9.23) |
Operating netback 1 |
5.29 |
(12.28) |
(1.65) |
11.54 |
|
|
|
|
|
Sales
volume (boe) |
3,971 |
19,706 |
12,140 |
58,837 |
- Operating netback
is a non-GAAP measure and is a term with no standardized meaning as
prescribed by GAAP and may not be comparable with similar measures
presented by other issuers. See “Non-GAAP Financial Measures” in
this news release. The calculation of operating netback is aligned
with the definition found in the Canadian Oil and Gas Evaluation
Handbook.
Kazakhstan Operations
In the fourth quarter of 2021, the Aks-1
post-salt exploration well on the Zharkamys prospect in Kazakhstan
was drilled to a total depth of 1015 meters. Oil was encountered
within a 30-meter interval but was bio-degraded and therefore
non-commercial. The well was plugged and abandoned and all
remaining Zharkamys exploration and evaluation assets have been
derecognized as of December 31, 2021. The Company has no further
development plans at Zharkamys, other than to complete the
contractual abandonment and reclamation works in due course. The
Zharkamys contract expired on January 18, 2022.
Selected Financial
Information
As at, and for the year ended December 31($000’s
except per share amounts) |
2021 |
2020 |
2019 |
Natural gas and condensate
sales |
883 |
2,780 |
5,169 |
Total revenue |
768 |
2,429 |
4,522 |
Cash used in continuing
operations |
(6,100) |
(6,666) |
(3,570) |
Net loss from continuing
operations |
(11,327) |
(14,936) |
(13,870) |
Net loss from continuing
operations per share (basic and diluted) |
(0.26) |
(0.34) |
(0.31) |
Capital expenditures |
4,297 |
477 |
152 |
Total
assets |
8,701 |
21,503 |
45,485 |
The Company’s ability to realize assets and
discharge liabilities in the normal course of business as they
become due is dependent upon the ability to fund operations by
generating positive cash flows from operations, securing funding
from debt or equity financing, disposing of assets or making other
arrangements. The Company is actively pursuing various strategies
to enhance its liquidity position and those matters are discussed
in greater detail in the Company’s financial statements and
management’s discussion and analysis for the year ended December
31, 2021.
NON-GAAP FINANCIAL MEASURES
The Company refers to “operating netback” in
this news release, a term with no standardized meaning as
prescribed by GAAP and which may not be comparable with similar
measures presented by other issuers. This additional information
should not be considered in isolation or as a substitute for
measures prepared in accordance with GAAP. Operating netback is
calculated as sales less royalties, production costs and
transportation and selling on a dollar basis and divided by the
sales volume for the period on a per barrel of oil equivalent
basis. The reconciliation of this non-GAAP measure is presented in
the “Turkey Operations” section of this news release. This non-GAAP
measure is commonly used in the oil and gas industry to assist in
measuring operating performance against prior periods on a
comparable basis and has been presented to provide an additional
measure to analyze the Company’s sales on a per barrel of oil
equivalent basis and ability to generate funds.
Forward-Looking Statements
Certain statements in this news release
constitute forward-looking statements under applicable securities
legislation. Such statements are generally identifiable by the
terminology used, such as “anticipate'', “appear”, “believe'',
“intend”, “expect”, “plan”, “estimate”, “budget'', “outlook'',
“scheduled”, “may”, “will”, “should”, “could”, “would”, “in the
process of” or other similar wording. Forward-looking information
in this news release includes, but is not limited to, information
concerning: the ability to realize assets and discharge liabilities
in the normal course of business as they become due; the timing and
ability to reach agreement on modular LNG feed-gas, end-user
volumes, plant locations and fiscal terms and to sign definitive
agreements under favourable terms, or at all, to construct
facilities, produce and deliver LNG in Kazakhstan; the timing and
ability to execute a production contract with the Government of
Uzbekistan under favorable terms, or at all, the fields and
exploration areas to be included and the terms and conditions
including but not limited to royalty rates, cost recovery, profit
allocation, gas marketing and pricing, government participation,
governance, baseline production levels and reimbursement
methodology; the expected benefits related to the Company’s
proposal to the Government of Uzbekistan and the timing and ability
to receive feedback and endorsement of the proposal, if at all; the
timing and ability to re-enter, case and fully evaluate the Yak
1-ST well and confirm commercial gas flowrates; the timing of and
ability to drill new wells, the expected drilling depths, the
expected number and location of target formations and the ability
of the new wells to become producing wells; the timing and ability
to tie the Yakamoz field into the Company’s existing gas plant; the
timing and ability to pursue other initiatives and commercial
opportunities; the ability to realize positive operating netbacks;
projections and timing with respect to crude oil, natural gas and
condensate production; expected markets, prices, costs; the timing
and ability to obtain various approvals and conduct the Company’s
planned exploration and development activities; the timing and
ability to access oil and gas pipelines; the timing and ability to
access domestic and export sales markets; anticipated capital
expenditures; forecasted capital and operating budgets and cash
flows; anticipated working capital; sources and availability of
financing for potential budgeting shortfalls; the timing and
ability to obtain future funding on favorable terms, if at all;
general business strategies and objectives; the timing and ability
to obtain exploration contract, production contract and operating
license extensions; and treatment under governmental regulatory
regimes and tax laws.
This news release also includes forward-looking
information regarding COVID-19 including, but not limited to:
travel restrictions including shelter in place orders, curfews and
lockdowns which may impact the timing and ability of Company
personnel, suppliers and contractors to travel internationally,
travel domestically and to access or deliver services, goods and
equipment to the fields of operation; the risk of shutting in or
reducing production due to travel restrictions, Government orders,
crew illness, and the availability of goods, works and essential
services for the fields of operations; decreases in the demand for
oil and gas; and decreases in natural gas, condensate and crude oil
prices.
By its very nature, such forward-looking
information requires Condor to make assumptions that may not
materialize or that may not be accurate. Forward-looking
information is subject to known and unknown risks and uncertainties
and other factors, which may cause actual results, levels of
activity and achievements to differ materially from those expressed
or implied by such information. Such risks and uncertainties
include, but are not limited to: regulatory changes; the timing of
regulatory approvals; the risk that actual minimum work programs
will exceed the initially estimated amounts; the results of
exploration and development drilling and related activities;
imprecision of reserves estimates and ultimate recovery of
reserves; historical production and testing rates may not be
indicative of future production rates, capabilities or ultimate
recovery; the historical composition and quality of oil and gas may
not be indicative of future composition and quality; general
economic, market and business conditions; industry capacity;
uncertainty related to marketing and transportation; competitive
action by other companies; fluctuations in oil and natural gas
prices; the effects of weather and climate conditions; fluctuation
in interest rates and foreign currency exchange rates; the ability
of suppliers to meet commitments; actions by governmental
authorities, including increases in taxes; decisions or approvals
of administrative tribunals and the possibility that government
policies or laws may change or government approvals may be delayed
or withheld; changes in environmental and other regulations; risks
associated with oil and gas operations, both domestic and
international; international political events; and other factors,
many of which are beyond the control of Condor. Capital
expenditures may be affected by cost pressures associated with new
capital projects, including labor and material supply, project
management, drilling rig rates and availability, and seismic
costs.
These risk factors are discussed in greater
detail in filings made by Condor with Canadian securities
regulatory authorities including the Company’s Annual Information
Form, which may be accessed through the SEDAR website
(www.sedar.com).
Readers are cautioned that the foregoing list of
important factors affecting forward-looking information is not
exhaustive. The forward-looking information contained in this news
release are made as of the date of this news release and, except as
required by applicable law, Condor does not undertake any
obligation to update publicly or to revise any of the included
forward-looking information, whether as a result of new
information, future events or otherwise. The forward-looking
information contained in this news release is expressly qualified
by this cautionary statement.
Abbreviations
The following is a summary of abbreviations used in this news
release:
boepd |
Barrels of oil equivalent per day |
Mscf |
Thousand standard cubic
feet |
Q |
Quarter |
* Barrels of oil equivalent (“boe”) are derived
by converting gas to oil in the ratio of six thousand standard
cubic feet (“Mscf”) of gas to one barrel of oil based on an energy
conversion method primarily applicable at the burner tip and does
not represent a value equivalency at the wellhead. Given the value
ratio based on the current price of crude oil as compared to
natural gas is significantly different from the energy equivalency
of 6 Mscf to 1 barrel, utilizing a conversion ratio at 6 Mscf to 1
barrel may be misleading as an indication of value, particularly if
used in isolation.
The TSX does not accept responsibility
for the adequacy or accuracy of this news release.
For further information, please contact Don
Streu, President and CEO or Sandy Quilty, Vice President of Finance
and CFO at 403-201-9694.
Condor Petroleum (TSX:CPI)
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Condor Petroleum (TSX:CPI)
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